WTO PANEL RULES AGAINST EU IMPORT BAN IN BEEF HORMONE CASE; BOTH SIDES CLAIM VICTORY

Both sides are claiming victory following the latest WTO ruling in one of the longest running disputes in the institution's history, which has pitted the US and Canada against the EU over trade in hormone-treated beef.

The ruling, released on 31 March, faulted all three parties to the case for not adhering to WTO rules and procedures.

Most significantly, the panel found that the EU's import ban on hormone-treated beef - despite modifications in 2003 in response to an earlier WTO ruling - was not compliant with multilateral trade rules, since it was not backed by an adequate scientific risk assessment.

The panel effectively sided with US and Canadian claims that the EU's ban remained scientifically unjustified. Therefore, the import prohibition failed to meet the requirements of the WTO Agreement on the Application of Sanitary and Phytosanitary measures, which governs the use of health and safety-related trade barriers.

Ironically, the current case arose from complaints filed by the EU in 2004. The EU objected to the fact that the US and Canada continued to levy trade sanctions on EU exports even after Brussels had modified the legislation underpinning the import ban (see BRIDGES Weekly, 7 September 2005). In its complaints, the EU claimed that by providing a new scientific rationale for the prohibition, it had removed the measure found to be WTO inconsistent in the earlier ruling, since it was the inadequate scientific backing for the ban that had been at fault, not the existence of a ban itself.

US, Canada sanctions did not follow procedure

The panel did rule that the US and Canada were in error: it said that Washington and Ottawa failed to follow proper WTO procedures when they retained over $125 million in annual sanctions dating back to 1999 on EU exports such as Roquefort cheese and Dijon mustard, based on unilateral determinations that even the updated import ban breached the EU's trade obligations.
The panel said that before choosing to maintain retaliatory sanctions, the US and Canada should have taken recourse to the dispute settlement system to determine whether the 2003 import ban still violated WTO rules. However, although the panel said that the US or Canada had not been authorised to 'suspend concessions' on EU goods - WTO parlance for imposing retaliatory sanctions - it stopped short of explicitly ordering them to remove the extra duties.

Each side claims victory

Each of the governments involved in the case has tried to turn the complicated ruling, which ran to hundreds of pages, to its advantage.

US Trade Representative Susan Schwab said that "the panel's findings on the EU ban are an important victory for all US farmers and ranchers," stressing that "EU consumers should have access to US beef - it is of high quality, safe and competitive." She said the "findings confirm the principle that measures imposed for health reasons must be based on science."

Canadian Trade Minister David Emerson added that "the WTO has once again sided with Canada by confirming that the ban is inconsistent with the EU's international trade obligations. Canada continues to rely on the WTO rules-based system to defend its trade interests. We hope that the EU will lift its ban."

The EU took a rather different perspective. "Today's panel report has confirmed that the US and Canada are imposing duties in breach of WTO rules," said a press release from the European Commission on 31 March. "The EU therefore demands that the US and Canada remove their retaliatory measures."

Nevertheless, Brendan McGivern, a partner at White and Case law firm in Geneva, said that the findings of the panel regarding the SPS agreement "are very harmful rulings for the EU." The US would be able to take all of the findings to a new panel, he suggested.

The European Commission press release disagreed with the panel's findings that the 2003 amendments to the import ban failed to bring it into compliance with the SPS agreement.
It is not clear why the EU, in its complaint, opened the door for the panel to examine its own compliance with WTO rules. It is conceivable that Brussels was confident of securing multilateral affirmation for what it thought was a solid attempt to comply with the previous ruling.

EU risk assessments insufficient

At issue in the case are six growth-promoting hormones. According to the EU, there is "overwhelming evidence" that one of them, oestradiol-17?, promotes cancer and harms genes, justifying a ban on the sale and importation of meat from animals that had been treated with it. For the other five, Brussels invoked the 'precautionary principle', arguing that provisional prohibitions were justified, since scientific progress since the Appellate Body ruling in 1998 had demonstrated that the risks posed by the hormones could not be adequately assessed.
The SPS agreement allows countries to impose trade restrictions for health and safety reasons based on scientific risk assessments (Article 5.1). It also opens the door to restrictions based on the precautionary principle, saying that trade measures based on "available pertinent information" can be justified when relevant scientific evidence is "insufficient" (Article 5.7).

The US argued that the EU's justification for the import bans failed to meet the WTO threshold for scientifically established risks. It suggested that the prohibitions were not based on existing international safety standards set by Codex Alimentarius, the UN body that sets food standards. The US also said that the EU's risk assessment procedures for the hormones were faulty, and were not in accordance with Codex practices, causing them to inaccurately over-estimate the hazards posed by eating meat from hormone-treated animals.

With regard to oestradiol-17?, the panel concluded, based on the parties' arguments and testimony from technical experts, that although the EU had presented scientific data evaluating the harmful effects of the hormone, it had "not provided analysis of the potential for these effects to arise from consumption of meat" from cattle treated with oestradiol-17? for growth promotion purposes. The EU's risk assessment was therefore not "appropriate to the circumstances," and failed to meet the SPS agreement's requirements (Articles 5.1, 5.2), rendering the import ban WTO-incompatible.

The SPS agreement does allow countries, under certain circumstances, to maintain health and safety measures "which result in a higher level of sanitary or phytosanitary protection than would be achieved by measures based on the relevant international standards" (Article 3.3). However, the panel refrained from ruling on whether the EU's oestradiol-17? ban could be justified as such, saying that the issue was moot since it was WTO-incompatible anyway (on the basis of the inadequacy of the risk assessment described above).

As for the five hormones that the EU regulated on the basis of the precautionary principle, the panel concluded that Brussels did not adequately establish that it was "impossible to perform a risk assessment within the meaning of" the SPS agreement. Furthermore, it said that the EU did not come forward with a "critical mass" of new evidence that would fundamentally undermine past international scientific findings (notably by a joint FAO/WHO expert committee) that meat from animals treated with the hormones was safe.

Environmental groups aggrieved

Environmental and animal rights campaign groups including Friends of the Earth Europe and the Royal Society for the Prevention of Cruelty to Animals heavily criticised the WTO decision, and urged the EU to appeal. They argued that the ruling "allows the US and Canada to force hormone-fed beef on Europe" and that it "puts the interests of North American exporters before those of European consumers, the environment, and animal welfare."

"The precautionary principle cannot be ignored for the sake of market expansion," said Charly Poppe, a trade and economic justice campaigner at Friends of the Earth Europe.
White and Case's McGivern cautioned that although the panel's requirement for a "critical mass of new evidence" set a "reasonably high threshold" for governments seeking to justify health or safety-related trade barriers on the basis of insufficient scientific evidence, comparable cases were "unlikely to come up often." The panel was considering circumstances under which evidence previously considered as sufficient would become insufficient - a relatively unusual event.

Nevertheless, McGivern said that the ruling was "a narrow reading" of what could be justified under Article 5.7. "I've always thought that Article 5.7 [of the SPS agreement] has never fulfilled the expectations that some people had of becoming an avenue for the customary international law principle of precaution."
All three nations can appeal the ruling.

"WTO Backs US, Canada in Beef Dispute with EU, But Both Sides Claim Victory," ASSOCIATED PRESS, 31 March 2008; "WTO Rejects EU Beef Hormone Ban but also Raps US, Canada," AGENCE FRANCE-PRESSE, 31 March 2008; "Canada Wins WTO Ruling over European Ban of Hormone-Treated Beef Imports," CANADIAN PRESS, 28 March 2008; "WTO Condemns US and Canadian Sanctions on EU Goods in Hormone-Treated Meat Dispute," EU TRADE NEWS, 31 March 2008; "Panel Finds EU Ban on Hormones Remains WTO-Inconsistent," US TRADE REPRESENTATIVE PRESS RELEASE, 31 March 2008; "Ministers Welcome WTO Report Reaffirming that EU Beef Hormone Ban is Unjustified," FOREIGN AFFAIRS AND INTERNATIONAL TRADE CANADA - NEWS RELEASE, 31 March 2008.